GUWAHATI: According to a consultancy report released on Tuesday, May 7, India's small shopping malls are increasingly becoming ghost malls as consumers are shifting towards online shopping and larger retail centers for enhanced experiences.
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These ghost malls, defined as properties with a vacancy rate exceeding 40%, have seen a notable increase, reaching 64 in 2023 from 57 in the previous year, as highlighted by real estate consultancy Knight Frank India.
This trend reflects a decline in consumer demand and raises concerns about potential job losses and economic repercussions, particularly impacting small retailers and service providers.
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Private consumption, constituting 60% of India's GDP, has shown sluggish growth, rising only by 3.5% year-on-year in the final quarter of 2023, despite the overall economy expanding by 8.4%. Knight Frank's director, Gulam Zia, expressed concerns over the precarious situation faced by many small shopping malls, stating that numerous are on the brink of closure.
The "Think India Think Retail 2024" report, based on a survey across 29 major cities, reveals a significant increase in underperforming retail assets, with 13.3 million square feet of shopping space remaining vacant in 2023, resulting in a revenue loss of 67 billion rupees ($802.5 million) for developers.
Struggling to compete with the convenience and variety offered by larger shopping centers, many small mall owners find themselves in a downward financial spiral, notes Zia. Among small shopping centers with an average leasing area of 100,000 square feet, 132 are at risk of becoming ghost malls, with the vacancy rate rising to 36.2% in 2023 from 33.5% in the previous year.
In contrast, larger shopping malls with an average leasing area of 500,000 square feet maintain a low vacancy rate of 5%, while middle-level shopping malls exhibit a 15.5% vacancy rate.
In the top eight cities, including Delhi, Mumbai, and Bengaluru, the total number of shopping malls decreased to 263 in 2023, with eight new retail centers added but 16 shutting down.
